The Central government has begun presenting rejoinders to the arguments presented by online gaming companies in the Supreme Court, starting Monday. Two key issues, related to e-gaming firms being supplier of goods and services, and payment of tax despite an absence of HSN Code for the service provided, were argued over two days.
Online gaming companies qualify as “supplier” under Section 2(105) of the CGST Act, and would therefore become the “taxable person”, the Centre told the Supreme Court.
“To put it simply, can the players be recipients of a supply of actionable claim if the online gaming companies are removed from the transaction. The answer would be in the negative. Without the companies, no supply takes place,” he said, adding that online gaming companies therefore becomes supplier, and become taxable persons.
The ASG also retorted to another argument, which made a case for non-payment of tax due to a lack of HSN Code, suitable for tax payment of some actionable claims by online gaming companies.
HSN codes are used under GST to categorize goods for taxation purposes. These codes directly correspond to a specific rate, and by using the correct code, a business can accurately determine the GST rate applicable to their product.
“This submission is equally misconceived. When it is not possible to mention a HSN code, the assessee will have to follow the clarification issued by the Ministry of Finance in Circular 06/06/2017 dated 27.08.2017. The assessee will have to fill ‘any chapter’ in the invoice and issue the same. The expression ‘any chapter’ is indicative that there is no corresponding Tariff Entry,” said Venkatraman.
“The Circular mentioned above was issued in the context of sale of lottery tickets, which is nothing but a supply of actionable claims. The same would equally govern the transaction in question which too is a supply of actionable claim, arising out of betting and gambling,” he added.
Moneycontrol reported last week that the hearing on a batch petitions pertaining to the constitutional validity of the taxation as well as regulatory aspects of online gaming has entered its last leg in the Supreme Court.
The core issue being argued is whether online games, such as rummy and fantasy sports, are “games of skill” or “games of chance”. And whether the GST should be levied on “full face value of bets” or the “actual transaction value”. The retrospective notices are also being challenged as they allege non-payment of tax on misclassification of these games by the e-gaming firms.
Source: Money Control
